Tuesday, June 19, 2007

Carbon Tax; Cap-and-no-Trade and some Straight Talk

"This proposal has attracted some interest, primarily it seems from the delusionist wing of the blogosphere (eg)."

"Of course the details of the proposal are completely impractical, and indeed I'm sure it wasn't even proposed as anything more than a thought experiment."

"Perhaps the least attractive aspect of the proposal is the way in which it bends over backwards to atttract the delusionists, giving them another fig-leaf to hide behind. They lost the argument years ago, and I don't see why anyone with a strong track record of incompetence, sophistry and dishonesty should be offered a free pass to the policymaking table. On the other hand, political expediency often enough trumps basic decency, and perhaps it could be argued that the end justifies the means."

Robert Reich seems to be proposing a cap-and-no-trade solution. If I am reading this right it is an intriguing idea:

"The best idea I’ve heard so far to deal with global warming is not a carbon tax....The winning idea isn’t a cap-and-trade system, either....The best idea I’ve heard is described as a carbon auction. Companies would have to bid for the right to pollute."

One of the widely discussed methods for reducing carbon pollution is ‘cap and trade’. In the cap and trade system, politicians decide, for each year, a cap on carbon pollution; and politicians decide how to allocate ‘emissions permits’ – or, as I’ll call them, ‘pollution permits’ – to corporations, or even to individuals.

The European emissions trading scheme is a cap and trade system. Bizarrely, the European system gives out pollution permits to corporations for free, and in proportion to their historical emissions – thus corporations that have historically been the worst polluters are given the most pollution permits!

Cap-and-trade is not popular with many American politicians, and I think they are right. After all, if we decide that we want to reduce the murder rate, do we give out a restricted number of murder permits to be traded among those who want to commit murders? To eliminate slavery, did we set up an international slave trade? Why should pollution be different from murder or slavery?

On page 148 (157 in reader) is a wonderful graph of the pricing of CO2.

There you have it.A climate scientist (who is also a betting man),An economist/attorney/politician (who somehow manages a sense of humor)A physicist (who if you read his book, will teach you what you need to know to slay dragons)